Social gaming firm Zynga today plunged 12 percent in regular trading, following a warning by Sterne Agee’s Arvind Bhatia, which indicated that the market’s fourth-quarter consensus may be too optimistic. Shares fell by 49 cents to end the day at $3.54.
Also today, UBS lowered its rating on Zynga’s stock from hold to sell, indicating deteriorating confidence in the company’s business fundamentals. Summing simply: Zynga got wrecked today as outside investors threw shade all over it.
Zynga has had a textbook rough time as a public technology company, with an IPO followed by a dramatic rise in its value, followed by a precipitous decline, and now years in the doldrums.
According to BusinessWeek’s summation, investors expect Zynga to lose 4 cents per share on revenue of $183 million in the fourth quarter. If those projections are too strong, you begin to wonder what upside the company may have. A quick look at past earnings, and the loss expected, is on the back of decreased year-over-year revenues.
In the fourth quarter of 2012, Zynga had revenue of $331 million.
Zynga has not been quiet. The company has a new CEO and changed its leadership structure in late 2013 to respond to its deteriorating condition. Still, it isn’t idle speculation to ask if those changes were less than what was required, and perhaps already over the event horizon.
The decline puts Zynga in an ironic position to excel: If it manages to merely meet the market’s consensus when it reports earnings, it could enjoy a firm bounce.
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